Bluetooth is a short-range radio used for communicating with PDAs, printers, cell phones, keyboards, etc. Basically, it lets peripherals establish a wireless connection with other peripherals and computers for more basic operations.

Wifi has a much larger coverage area with higher speeds, and is used for networking multiple devices and connecting to the internet wirelessly. It allows you to transfer data/commands between all WiFi-enabled devices that are over a few feet apart. The exact distance, however, varies.

For more information, check out the following articles from HowStuffWorks.com (A great resource): Bluetooth and WiFi

You may also want go get some information directly from the horses' mouths: Wi-Fi Alliance and Bluetooth

Hope this helps,
John